Local Government Center case: $2.2 million in taxpayer dollars used to stop return of $53 million in taxpayer dollars

CONCORD - The New Hampshire Local Government Center has spent $2.2 million in taxpayer funds contesting a Secretary of State order to return $53 million to members of its public insurance risk pools.

Interim Executive Director George Bald said he is attempting to slow the legal fight, which has resulted in an appeal to the state Supreme Court, and stop the flow of money to lawyers.

"When it comes up to more than $2 million, it's an awful lot of money," he said. "Certainly, I'm saddened we've had to spend that amount of money.

"I clearly understand that it's taxpayer money," he said.

By comparison, Primex, which is LGC's main competitor in the market for public workers' compensation coverage in New Hampshire, paid $31,799 in legal fees, said Primex CEO Ty Gagne. The company opted to settle with BSR, he said.

"We chose to reach an agreement because we find the dialogue with the bureau to be open, transparent and reasonable," Gagne said. "We were able to work with them to achieve a methodology that still protected the pool."

David Lang, president of the New Hampshire Professional Fire Fighters, who has led a decade-long battle to force LGC to become more transparent about how it was using member money, said the amount LGC spent to fight the BSR order was inappropriate.

"One has to look at the premise behind the fight," said Lang. "The hearings were about returning taxpayer active and retiree money back to those parties. It was basically giving them their own money back.

"Whether it was $2 or $2.2 million, in my estimation the premise was wrong," he said. "To use over $2 million of other people's money to prevent them from getting their own money back makes no sense to me."

Bald said he did not know why former LGC executive directors John Andrews and Maura Carroll chose to contest the BSR rather than settle.

"I can't speculate as to why the people who made those decisions did what they did," Bald said. "The leaders who made those decisions are not here anymore."

Bald said one reason the amount was as high as it is was because numerous parties and individuals were named in the hearing officer's order. He said each person named in the order required legal representation. In addition to LGC and the individual insurance programs, Carroll, Andrews and 11 other individuals were named, according to the order.

"Certainly, it would have been less expensive if there hadn't been so many people involved," he said. "My hope is that I can move us out of the legal arena so we're not spending so much money in legal defense."

After a hearing last year, LGC's Property and Liability Trust and its health insurance provider, HealthTrust, were ordered to repay $3 million and $33 million, respectively, from cash reserves that the state deemed to be too high.

Additionally, Property and Liability Trust, which is the parent of LGC's workers' compensation program, has been ordered to repay more than $17 million that the state deemed was illegally transferred from other programs to the workers' compensation program. LGC officials are struggling with how to pay the money back, given that the workers' compensation program has no cash reserves and the Property and Liability Trust program does not have enough cash reserves to cover both orders.

The workers' compensation program has annually lost as much as $4 million and is afloat only because it has been subsidized by LGC's other programs. LGC officials have said the program could collapse if the order is not altered or reversed.